Diplomat's mission: Bridging gap between specialty and traditional Rx

By Jim Frederick

Can one of the nation's premier specialty pharmacies maintain its focus on each patient it serves while simultaneously smashing its own growth records and reaching national power-player status in the rarified world of specialized medication services?

Absolutely, say the people running Diplomat Specialty Pharmacy Serving all areas of specialty pharmacy, with its largest sectors managing oncology and immunology medications, the Flint, Mich.-based provider has exploded in size in recent years. But its successful track record and business model, say company leaders, remain rooted in a bedrock of disease-specific patient management programs, successful patient outcomes, highly effective drug adherence efforts and a wide-ranging, holistic brand of care for patients that goes well beyond clinical outreach.

"Our model has always been very patient-focused," said Diplomat co-founder and CEO Phil Hagerman. "Even though we've become a more than billion-dollar company in revenue, we've never lost sight of the fact that at the end of everything we do, there's a patient attached to it."

"One of the questions we get asked a lot at Diplomat is, 'At what point are you going to be too big to deliver a high-touch model?' We don't believe our business model is predicated or constrained by size. We think this is a combination of philosophy and technology, and as long as we can use technology appropriately, we believe we can continue to drive that high-touch service model, using technology to create a more efficient touch-point process," he said.

In fact, added Hagerman, "I think our model has gone back to the roots of traditional corner drug stores: to know and understand the needs of our patients, and not forget that they're individuals with their own serious challenges whom we need to support."

The company traces its roots to its opening as Ideal Pharmacy in Flint in 1973, the fourth store in a small chain owned in part by pharmacist Dale Hagerman. When his son Phil graduated two years later, the father/son team of pharmacists purchased that fourth store from Ideal Pharmacy and launched Diplomat in 1975, specializing in a more comprehensive and focused model of care and personal service, much of it for patients with serious and chronic conditions requiring a higher-touch level of care.

Since then, Diplomat has grown to become one of the premier players in the specialty arena, along with a unique business model as a back-end specialty pharmacy provider to hospitals and major retail pharmacy operators, as well as with locations in Flint and Grand Rapids, Mich.; Chicago; Ft. Lauderdale, Fla.; and Ontario, Calif. Nevertheless, the company hews to the guiding principle advanced by its founders: "Take good care of the patients, and the rest will fall into place."

In a daylong series of interviews with DSN in June, Diplomat's leaders repeated that mantra with obsessive regularity, insisting that the focus on improving patients' well-being — and on saving them and their health plan payers money — is encoded in the company's DNA.

It's also hardwired into the job descriptions for Diplomat's 60-odd pharmacists, its clinical-care and patient-support teams, its insurance and funding specialists, and even its sales and marketing people, according to Hagerman and other Diplomat managers. Indeed, says Jennifer Cretu, VP information technology and marketing, in an off-hand remark that nevertheless reflects the philosophy that has kept Diplomat true to its core mission: "We have 900 employees, and essentially two-thirds are patient-care coordinators."

In line with that patient-centric approach, Diplomat president Gary Kadlec said his role "is simple: to take a company that's growing tremendously and doing the right things clinically for its patients — and the right things economically for the country — and allow it to continue to grow at the same rate without losing that connection to the patient." That means that even when the company doubles or triples in size, "the patient should never know that we're bigger," he added.

From his experience in leading high-growth pharmacy companies, Kadlec has patiently and quietly reorganized the executive structure. "We have 13 executives who run this company ... in a manner that will allow us to continue growing at this rate, and not lose sight of that patient," he said.

To that end, the baker's dozen of top managers meets every Wednesday for three hours. "We pretty much took the presentations out of these meetings unless there's something we all need to [address]," he explained. Instead, the key function of those weekly gatherings is "to go around the room, round-robin, and let everybody in that room know what everybody else is doing."

"We're doing our darnedest to not allow silos to build within this company," Kadlec said. "And if you carry that through the company, ... I believe what we're building is an agile pharmacy system ... that can interact with hospital systems and retail communities and laboratories. We can build a virtual pharmacy."

In line with health reform, the rise of accountable care organizations and medical homes — and the health system's urgent need for greater connectivity and collaboration to boost patient outcomes and curb costs — that integrated pharmacy model is being created "so that if we need to have a lab or a hospital interact [on behalf of a patient's treatment plan], we can," Kadlec explained. "And the team we put together here can be the core."

Diplomat, its leaders assert, has put itself in the sweet spot of both a U.S. healthcare system desperate for lower-cost solutions to an unsustainable cost spiral and a pharmaceutical marketplace increasingly shifting from traditional to specialized medications as manufacturers target more specific disease states and patient populations with breakthrough large-molecule research and bioengineering. How?

By developing a suite of cost-effective, holistic clinical services designed to improve long-term patient outcomes and boost adherence, along with proven expertise in drug compounding, long-term disease management, cost containment, step therapy and other services;

By creating win-win partnerships with retail chains, hospitals, pharmaceutical makers and other healthcare stakeholders to help each of those groups participate more effectively and profitably in the exploding market for specialty medicines;

By working with pharmaceutical manufacturers to help them make the right decisions about where to distribute their specialty medications. That effort could pay dividends for the pharmaceutical companies concerned that their high-end, highly complex products are dispensed only in pharmacies qualified to provide the patient outreach, clinical care, drug-adherence and documentation support services needed to maximize patient outcomes and satisfy regulatory requirements. But it also could boost access by Diplomat's retail pharmacy partners to hard-to-obtain, limited-distribution drugs to keep them in the distribution network and keep their specialty-needs patients coming back.

"All the retailers in the country are now trying to get their arms around specialty. And they've got a lot of challenges," said Hagerman. "The REMS programs make it tough for them. The limited-distribution drugs make it almost impossible for them to participate. And even the traditional pharmaceutical companies are channel-managing products away from retail because historically retail pharmacy doesn't show as good a rate of persistency, result or outcome with specialty drugs."

Diplomat, he adds, sits at the nexus of a massive sea of change in the nation's pharmaceutical and healthcare arena, where the new era of specialized and bioengineered drugs intersects with the increasingly urgent need among many retail pharmacies to adapt to the new paradigm and gain entry to this exploding arena of expensive, high-tech and high-touch medications. "We see specialty growing and continuing to expand in these complex therapies, where you've got more limited-distribution drugs, drugs with REMS programs that require validated touch points by medical professionals, and a lot of side-effects management," Hagerman told DSN. "So we see specialty pharmacy as getting more rather than less complex over the next five years."

To that end, said Hagerman, "we made the decision about four years ago as a company, for us to really be relevant in the future, we needed to be more than just a distributor of high-cost drugs. High-cost drug distribution is a critical part of what we do, but it's also an industry that's become somewhat commoditized. And we believed that in order for us to expand our scope of relevance, we also needed to be a service provider."

It's that high-touch service model that really sets Diplomat apart. "It could be creating a specific adherence program that's not involved in distribution to keep a patient on a drug longer," Hagerman explained. "It could be a program to manage the side effects around a drug. Or it could be services ... that expand specialty's model into different channels like the retail and hospital setting ... for patients who are not yet truly getting specialty pharmacy services [like] improved outcomes management or persistency programs."

That need led the company in 2009 to launch its Retail Specialty Network, which Hagerman said has "been a tremendous growth engine for us, and part of why we're so excited about the National Association of Chain Drug Stores [Total Store Expo] meeting." More recently, Diplomat launched a similar program to provide hospitals and health systems with specialty services.

Diplomat is positioning RSN as a solution to a critical void that all but the biggest retail pharmacy chains are facing. Said Gary Rice, Diplomat's VP clinical services: "Specialty is really the new retail pharmacy. Ninety percent of what retailers do today is generics, and if you look at all the branded products coming out, ... it's all specialty. So in terms of sustainability, the visionaries in retail pharmacy are seeing the need to have some involvement in specialty" and "become more progressive in their approach to specialty pharmaceuticals."